Tips for Buyers & Sellers

Presented by Miami Condo & Florida Real Estate Expert Nell Kellett P.A.
By clicking on any of the article topics below, you may view an article.

For Buyers

Where do you start?  Start with your credit!
Can you afford to buy a house?
Why should you own a home?
When buying a home, determine your needs.
Tips for Foreign buyers and sellers


For Sellers

Should you stay or should you go?
A good first impression helps sell your house.
Showing your home.
Passing your home inspection.
 

Where do you start?  Start with your credit!

When you look for a mortgage, lenders will review your credit report. Your credit report is a history of how you have managed your finances and repaid debt. It provides information on money you have borrowed and a history of your payments.

Your credit history is pulled together into a credit report by three private companies: Equifax, Experian and Trans Union. These companies sell your credit report to banks and other creditors so they can review mortgage and loan applications.

Your credit report includes:

*A list of debts, such as credit cards and car loans, and a history of how you have paid them.
*Any bills that have been referred to a collection agency. This can include items like phone and medical bills.
*Public record information, such as tax liens or bankruptcies, even if these have happened several years ago.
*Inquiries made about your creditworthiness. An inquiry is made when you request credit. Many times your report will also show if you were given credit based on the inquiry.

Most of the information in your credit report is deleted after 7 years (a bankruptcy is deleted after 10 years) and is continuously updated to reflect the latest information.

It's important that you look at your credit reports from each of the three companies to make sure they are correct. Your credit report may vary from one company to the other.

Your Credit Score

When you apply for a mortgage, the lender may request a credit score as well as a credit report. A credit score is a computer-generated number that indicates your ability and willingness to repay a debt based on your credit record.

Your credit score is part of the mortgage information that will decide if your application is approved. Your credit score may also be used to determine the mortgage interest rate.

Start Building Your Credit

Building good credit doesn't have to be difficult. Follow these tips and you're on your way:

*Pay Your Bills on Time. How you've paid your bills in the past can indicate how you'll pay in the future. Credit scores emphasize your most recent payment record so if you've been late, start paying on time!
*Pay at Least the Minimum Amount Required. You can always pay more, but you should never pay less.
*Keep Credit Card Balances Low. Don't "max out" your credit cards.
*Don't Apply for Too Many Loans or New Accounts. Requesting a lot of credit in a short time span may concern lenders that you won't manage your debt well.
*Establish Credit if You Have None.
*Apply for one or two credit cards. Use the cards carefully and pay them off each month.
*Make a Budget and Live Within It!

A budget will help you meet your monthly bills, and therefore help your credit. It also can help increase your savings for things like a down payment on a house.

Demonstrating your ability to save and having funds on hand will help you in the mortgage approval process. Your personal savings should be sufficient to last several months should you lose your job or source of income.

 

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Can you afford to buy a house?

While everyone would like to live the American Dream of buying and owning a Home it is important to understand all the costs involved in buying and owning a home.

Many potential buyers sometimes forget to factor in the down payment, homeowners insurance and the possibility of depreciation, as well as the costs associated with closing the transaction, moving, purchasing major appliances, and home, landscape and pool maintenance, not to mention furnishings and design accessories once you move in.

For a general idea of your buying power, multiply your annual gross income by 2½. For example, if you had a household income of $50,000, you might be able to qualify for a $125,000 home. The actual number may be more or less, depending upon your individual situation, debts and credit history.

Housing Expense Ratio

As a general guide your monthly mortgage payment should be less than or equal to a percentage of your income, usually about a quarter of your gross monthly income. The percentage can change depending on the type of mortgage you choose. However, there are mortgage products available that focus solely on the debt-to-income ratio. Your lender can provide more information on these types of mortgage products.

Debt-to-Income

Your buying power can be affected by factors such as your income, debt and credit history. Your debt, such as credit card bills and car loans, and other expenses such as housing expenses, alimony and child support, should not be more than about 30-40% of your gross income.

How Much Money Do I Need to Buy a Home?

You'll need money for:

1.) A down payment
2.) Closing costs
3.) Other housing-related costs – mortgage payments, maintenance and repair costs

Your Down Payment

The down payment is a percentage of the value of the property. What percentage that is will be determined by the type of mortgage you select. Down payments usually range from 3 to 20% of the property value.

You may be required to have Private Mortgage Insurance (PMI or MI) if your down payment is less than 20%.

Closing Costs

Closing costs include points, taxes, title insurance, financing costs and items that must be prepaid or escrowed and other settlement costs. These costs generally range between 2-7% of the property value. You will receive an estimate of these costs from your lender after you apply for a mortgage.

While it may seem that it can take a lot to actually buy your home, you may be closer than you think.
 

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Why should you own a home?

Some people like the flexibility that comes with renting. When you rent, you can live in a neighborhood for as little or as long as you want. You're also free of most maintenance responsibilities – your landlord usually handles repairs.

Of course there are many other reasons owning a home can be beneficial. These are just a few....

Build Equity

In the early years of most mortgages, the majority of your monthly mortgage payments go towards interest on your loan. Over time, an increasing amount of the monthly payment goes toward reducing mortgage balance, or "principal."

As you make payments, you reduce the principal and increase your share, or "equity," in your home's value. If your home increases in value through appreciation, your equity will build even faster.

Building equity—or savings—in your home is important. For many people, it lets them plan for retirement and other future goals.

Gain Tax Advantages

You are allowed to deduct mortgage interest and property taxes from your federal income tax and from some states' income tax. These deductions can mean significant tax savings, especially in the early years of the mortgage when interest makes up most of the monthly payment.

After calculating your taxes, you may find that it's cheaper for you to buy than to rent.

Rely on Payment Stability

If you select a fixed-rate mortgage, you will pay the same monthly principal and interest payment for the term of your loan. Unlike renting, this type of payment will remain the same month after month, even when inflation leads to higher prices. However, your total monthly housing expense could vary if tax and/or insurance expenses change.

 

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When buying a home, determine your needs.

Before you begin house hunting, create a realistic "shopping list" to narrow your search. Looking for a home can take time, especially if you have not focused on what is most important.

Create a "wish list" and a "must have" list. Many people focus more on "wants" than "needs." As a result, they sometimes reject homes that perfectly meet their needs in search of homes that meet their wants, which in many cases can be out of your budget and unaffordable.

That's not to say that you shouldn't try to get what you want – you should just be able to tell the difference between what you really need and what you would like to have.

 

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Tips for Foreign buyers and sellers.

Latest FIRPTA Information

Presented by Nell Kellett P.A. Broker Owner
FOREIGN INVESTOR SPECIALIST

Non-residents are required to file a return and pay tax on the gain. The gain is the difference between the selling price and the seller’s cost basis in the property. The seller’s cost basis is the original purchase price plus additional items, including, but not limited to, certain closing costs on the original purchase, commissions and other sale expenses, plus capital improvements to the property. Because the actual gain and corresponding tax is not known at the time of the sale, it was thought that withholding 10% of the sales price would encourage compliance. Sometimes, the 10% amount withheld under FIRPTA will exceed the actual tax on gain that will be due when a return is filed. For example, if the gross sales price of a single family home is $500,000.00, the closing agent is required to withhold $50,000 and remit this amount to the IRS. Assuming that the actual tax on the gain is less than $50,000, the seller would have to file a return to obtain a refund. If the sale occurred in January of 2003, the seller would have to wait until January 1, 2004 to file a 2003 income tax return and request a refund. To avoid this unpleasant and unnecessary situation and to avoid excess withholding when the required amount exceeds the tax actually due, the Seller may file an application for a withholding certificate with the IRS prior to closing (Form 8288-B). In the application the Seller substantiates to the IRS that the actual tax that will be due when a return is filed is less than the amounts required to be withheld at closing. At the closing, if the Seller provides the Buyer/closing agent with proof that the Seller has applied for a withholding certificate, the Buyer/closing agent is still required to withhold the mandatory 10% of the gross sales price, but these funds can be kept in the trust account of the closing agent pending receipt of the IRS approval or denial of the application. The IRS is supposed to make its determination within ninety (90) days of its receipt of the application. Of course, if the IRS approves a lesser amount of withholding, then within 20 days, the closing agent will send the lesser amount to the IRS and refund the balance directly to the Seller.

This is a very important and advantageous procedure which should be fully considered and utilized by my clients, under the guidance of a certified public accountant or tax attorney, if at all possible. It is important to note that this is one of the most important areas of FIRPTA which has been affected by the new regulations.

Nell Kellett and the Florida Realty Expert Team will help you find qualified legal and financial counselors and provide you the professional guidance only a qualified Real Estate professional can provide. Contact Nell Kellett at 305-968-2122 or Nellie@MiamiCondoExpert.Com
Hablamos Espanol !!

Nell Kellett now offers pre-qualification of your mortgage based upon your non-US credit history. Favorable finance rates and excellent investment and vacation homes are available now.

 

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Should you stay or should you go?

When agents are showing your home to a prospective buyer, sellers often wonder should they stay or should they go? Some reasons sellers want to stay are because they think agents and buyers won't be able to find everything, that they must be there to point out important features. Truthfully, most just want to be present to see buyer reaction firsthand.

Perhaps You Should Go...

Sellers should be aware that at the very least buyers feel uncomfortable when they are present, and that it can actually kill a sale. Buyers often won't even open closet or cabinet doors when the seller is home, and when they cannot view a house comfortably, they'll hurry up and move on to the next one.

Sellers want to talk, and not just about the house. You never know when a buyer will be turned off by the mood of the seller, or by a statement the seller makes. Buyers are there to look at the house, not chit chat about hobbies or the weather or worse--politics and other controversial topics.

If you (the seller) must be home during a showing, perhaps just go outside, take the dog for a walk or stay put in one location, do not wander around with the agent and buyers.

 

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A good first impression helps sell your house

It can't be overstated—when it comes to buying a house, the first impression is everything. If you're selling or getting ready to sell in the coming months, one of the easiest and most dramatic ways to enhance that first impression is through paint.

Fresh paint makes your house look clean, bright, and inviting.

Painting your house's exterior and interior before you put it on the market give the biggest bang for your fix-up buck.

Agents agree that sellers shouldn't take curb appeal lightly, especially when so many buyers are doing their homework and looking at the exterior of houses before they even contact an agent.

If nothing else, paint at least the door, door frame, and foyer or first room the would-be buyers will see.

• Use fresh, neutral colors. If you're painting the exterior, make sure the color blends in with the neighborhood. Opt for whites, creams or neutrals. The PQI says these colors appeal to the greatest number of people.
• Whether you paint yourself or hire someone, make sure all the prep work is done—washing all dirt away, and patching and repairing any necessary areas on the surface before it is painted.
• Paint railings, window frames, trim, and other accents to freshen up the exterior.
• Promote any recent painting in your ads, flyers and online descriptions of your house. Homeowners and buyers place a high value on the painted appearance of a home. Include the date the paint job was completed and the quality of paint that was used.
   

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Showing your home.

Be Ready to Show at All Times

Sellers should be aware that same-day and even last-minute requests for showings are common. You should always be ready for a showing, so keep your home organized and clean. Tell the kids to put their toys away when they are done playing and make sure you don't let those dishes pile up in the sink.

Keep it Flexible

Most agents do try to arrive within the scheduled showing time, but sometimes it isn't possible. They may get stuck in traffic, or the house they saw prior to your showing took longer than expected. It happens, and sometimes it happens too late to be fixed by a phone call.

If this happens you may want to stay away from home a little longer than you think is necessary, just to make sure you don't interrupt a showing.

Pets Must Be Controlled

Pets should be out of the house during showings, especially large dogs, since many people are afraid of them. A gruff bark coming from inside the house is enough to make some home buyers turn around at the front door.

Because most people are not aware of odors in their own home, such as those from a pet, you may want to keep the pets outside or in a controlled area, or maybe just use an air purifier or freshener. You don't want buyers to remember the home as the house that smells.
 

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Passing your home inspection.

Nearly all buyers will hire a professional home inspector to take a close look at their new home before closing. Sometimes home inspections are done before the home goes under contract.

Home inspections cover numerous systems within the house, but there are a handful of hot-spots that worry buyers the most. Don't wait for inspection day to assess the condition of your home and make necessary home repairs. Small problems can turn into big headaches more quickly than you might imagine, requiring a chunk of cash to fix and perhaps lowering the home's market value.

Mold & Mildew
Mildew stains and odors scare buyers, especially now that toxic black mold is such a hot topic. Chances are you won't even get an acceptable offer if mold and mildew are present.

Even if the mold in your house is the normal variety--and not stachybotrys chartarum--take care of it immediately. Kill the mold and mildew and fix the source of the problem.

The Roof & Its Neighbors
Deteriorated shingles or other roof coverings are one of the first things home buyers and home inspectors notice. If the elements underneath the shingles are moist or rotted, you can bet repairs will be requested.

Clean the gutters and make sure downspouts are positioned so that water runs away from the house.

Flashing around the base of chimneys should be watertight. Mortar and bricks should be in good condition.

Plumbing Problems
Fix leaks and clogs long before the home inspection takes place. The inspector will check water pressure by turning on multiple faucets and flushing toilets at the same time. Appliances such as dishwashers and clothes washers will be tested, too. Leaks and clogs will be apparent during these checks.
The home inspector might check the septic system. During one method dyes are flushed down a stool. The inspector waits to see if the dye surfaces on the drainfield, indicating a drainage problem.

Other Systems
The inspector will check the heating and cooling systems, making sure they work and commenting about their efficiency. The inspector will take a close look at the structure and foundation. All appliances will be checked. The inspection report will include details about smoke detectors.

Before the Inspection
Do everything you can to get the house in good condition before you attempt to sell it, but don't be discouraged if the inspection report contains negative statements. Home inspectors make note of everything they see. No home is perfect.

Remember that the home inspection report is not a wish-list for buyers. Read your contract carefully--it probably states which systems should be in good working order at closing. For instance, if the roof is older, but doesn't leak, it is in good working order. If there's a leak, and fixing just the leak is possible, the roof will be in good working order.

Your contract may also state that you are under no obligation to make any repairs at all--although the buyers can then likely withdraw from the contract. Don't feel you must comply with unreasonable demands for repairs.

 

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